Pebblebrook to buy Embassy Suites Hotel, San Diego

SaabiraChaudhuri

Pebblebrook Hotel Trust
PEB, +0.45%
has acquired the Embassy Suites hotel in downtown San Diego for $112.5 million, as the real estate investment trust looks to expand in the region.

The 337-suite, full-service hotel will be managed by HEI Hotels and Resorts. Pebblebrook is taking on a $66.8 million secured, nonrecourse loan and will fund the rest of the deal using cash.

"We're very excited about the acquisition of the Embassy Suites San Diego Bay-Downtown and the opportunity to further expand our presence in the highly desirable downtown San Diego market," Chief Executive Jon Bortz said. "The strong leisure, group and convention demand for San Diego, particularly in this location along the waterfront, makes the Embassy Suites San Diego Bay-Downtown an excellent investment for our company."

Built in 1988, the hotel was renovated in 2006 and last May completed a $3.5 million guest-suites renovation.

In 2012, the hotel operated at 83% occupancy, with an average daily rate of $198; room revenue per available room of $165; earnings before interest, taxes, depreciation and amortization of $8.8 million and net operating income after capital reserves of $7.8 million. For all of 2013, the company currently forecasts hotel will generate EBITDA of $8.5 million to $9 million and net operating income of $7.5 million to $8 million.

The company expects to incur about $900,000 of costs related to the acquisition of the hotel and $200,000 of costs related to the transition of a new management team that will be expensed as incurred.

The acquisition of the Embassy Suites San Diego Bay brings the total number of properties in the company's portfolio to 26, comprising $2.1 billion of invested capital.

Shares of Pebblebrook closed Tuesday at $25.17 and were inactive premarket. The stock has risen 17% in the past three months.

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